Correlation Between Magic Software and Eli Lilly

Can any of the company-specific risk be diversified away by investing in both Magic Software and Eli Lilly at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Magic Software and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Magic Software Enterprises and Eli Lilly and, you can compare the effects of market volatilities on Magic Software and Eli Lilly and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Magic Software with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Software and Eli Lilly.

Diversification Opportunities for Magic Software and Eli Lilly

-0.36

Correlation Coefficient

Magic Software  Eli Lilly

Very good diversification

The 3 months correlation between Magic and Eli is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Magic Software is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Magic Software Enterprises are associated (or correlated) with Eli Lilly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eli Lilly has no effect on the direction of Magic Software i.e., Magic Software and Eli Lilly go up and down completely randomly.

Pair Corralation between Magic Software and Eli Lilly

Assuming the 90 days horizon Magic Software Enterprises is expected to generate 1.09 times more return on investment than Eli Lilly. However, Magic Software is 1.09 times more volatile than Eli Lilly and. It trades about 0.02 of its potential returns per unit of risk. Eli Lilly and is currently generating about -0.11 per unit of risk. If you would invest  1,087  in Magic Software Enterprises on October 5, 2024 and sell it today you would earn a total of  3.00  from holding Magic Software Enterprises or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Magic Software Enterprises  vs.  Eli Lilly and

Magic Software Enter

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Magic Software Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Magic Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Eli Lilly

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eli Lilly and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Eli Lilly is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Magic Software and Eli Lilly

The main advantage of trading using opposite Magic Software and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magic Software position performs unexpectedly, Eli Lilly can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Eli Lilly will offset losses from the drop in Eli Lilly's long position.

The idea behind Magic Software Enterprises and Eli Lilly and pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.